Monday, November 16, 2009

The WPA has nothing to do with money printing.

.Bill Mitchell, Warren Mosler and L.Randal Wray between them have devoted about a million words to advocating WPA type schemes - (WPA was a large scale “make work” scheme set up in the US 1930s). And the above trio claim that such schemes can reduce unemployment to near zero. To a significant extent their arguments are based on the fact that that a country that issues its own currency has more freedom of manoeuvre when it comes to stimulating its economy than a country in a common currency area. That is, the argument to a significant extent is: “the amount that needs to be spent to get a large scale WPA system going is small (or at worst equal to) the amount of extra money that an “own currency issuing” country can print each year, without exacerbating inflation.”

Malcolm Sawyer has attacked the above WPA idea. But there is one flaw in the above argument that Sawyer hasn’t spotted (at least not in the paper you get to from the latter link). The flaw is thus.

Freedom to print money and stimulate one’s economy is not an argument for stimulating it in any particular way, e.g. the WPA way. Indeed, the above trio of authors suggest various other ways of simulating economies using printed money. Thus money printing has nothing to do with the arguments for or against WPA. The question as to whether to implement WPA type schemes is entirely dependent on its merits compared to other forms of employment creation.

Quad Erat Demonstrandum. Or put it another way, the above trio are not grumpy enough – see 13th Nov post immediately below.